House subcommittee chairman: Obama administration policy would eliminate half of all existing Medicare Part D plans

The Obama administration’s new proposed rule for Medicare Part D would eliminate half of all Medicare Part D plans and raise prescription drug premiums for millions of seniors by up to 20 percent, according to a U.S. House subcommittee chairman.

“Today, the average senior has 35 different [Medicare Part D] plans to choose from this year. This rule would reduce that choice to two plans. 50% of the plans offered today will be gone, and the health care that seniors like may go with it,” House Energy and Commerce Health Subcommittee chairman Rep. Joe Pitts said in a statement at a Feb. 26 hearing attended by a top administration health official.

“Limiting seniors’ choices like this will inevitably lead to higher costs. By some estimates, the restriction on the number of plans that can be offered could cause premiums to rise by 10%-20%. Costs to the federal government may increase by $1.2-1.6 billion according to a study by Milliman,” Pitts said. “… I urge Secretary Sebelius and Administrator Tavenner to rescind this rule.”

The study Pitts cited also showed that the new rule would increase out-of-pocket drug costs for 6.9 million seniors who do not qualify for low-income subsidies, and would raise federal taxpayer costs for six million seniors who do qualify.

President Bush signed Medicare Part D into law in 2003 to subsidize prescription drug costs for Medicare beneficiaries.

The Daily Caller reported that the administration’s Centers for Medicare and Medicaid Services (CMS), a division of Kathleen Sebelius’ Department of Health and Human Services (HHS), recently introduced a new proposed rule on the Federal Register called “Medicare Program: Contract Year 2015 Policy and Technical Changes to the Medicare Advantage and the Medicare Prescription Drug Benefit Programs.”

The new rule “would revise the Medicare Advantage (MA) program (Part C) regulations and prescription drug benefit program (Part D) regulations to implement statutory requirements; strengthen beneficiary protections; exclude plans that perform poorly; improve program efficiencies; and clarify program requirements,” according to the Federal Register.

The rule states that it also aims “to implement certain provisions of the Affordable Care Act.”

The new rule’s stated desire to “strengthen our ability to identify strong applicants for Part C and Part D program participation and remove consistently poor performers” would give the Obama administration new authority to limit health insurance and prescription drug providers under the Medicare Advantage and Medicare Part D programs.

The rule would also violate the Medicare Part D’s law’s “non-interference provision that prohibits the Secretary of Health and Human Services (HHS) from interfering with the negotiations between drug manufacturers and pharmacies and sponsors of prescription drug plans,” according to testimony by American Action Forum president Douglas Holtz-Eakin, violating “congressional intent.”

Rep. Pitts expressed confusion and anger at CMS’ new rule.

“CMS itself says that 96% of the Part D claims it reviewed showed seniors saved money at preferred pharmacies, and nearly 25,500 seniors in my district have chosen Part D plans with a preferred pharmacy network. Yet CMS would take that away from them,” Pitts said.

“The Medicare Part D prescription drug benefit is a government success story. Last year, nearly 39 million beneficiaries were enrolled in a Part D prescription drug plan,” Pitts said.

“Competition and choice have kept premiums stable. In fact, in 2006, the first year the program was in effect, the base beneficiary premium was $32.20 a month. In 2014, the base beneficiary premium is $32.42 — a 22-cent increase over 9 years — and still roughly half of what was originally predicted,” Pitts added. “More than 90% of seniors are satisfied with their Part D drug coverage because of this. African-American and Hispanic seniors report even higher levels of satisfaction, at 95% and 94%, respectively.”

“The program has worked so well because it forces prescription drug plans and providers to compete for Medicare beneficiaries — putting seniors, not Washington, in the driver’s seat. Part D should be the model for future reforms to the Medicare program,” Pitts said.

House Energy and Commerce committee chairman Rep. Fred Upton joined with Pitts at the hearing in criticizing the new rule.

“The proposed rule, issued on January 6, 2014, appears to be a direct assault on the competitive structure of the program. It inhibits the ability of plans to obtain discounts for beneficiaries, limits the range of market segments in which they may compete, and usurps the responsibility of states to license those able to prescribe. This 700-page proposal makes numerous changes,” Upton said.

CMS principal deputy administrator Jonathan Blum testified that limiting Part D sponsors to providing only two plans per region will “promote needed clarity of plan choices for beneficiaries.”